WideEyed wrote:AnotherBrian, absolutely, I think there's a good place for Fibs and S/D especially in relation to SL and TP levels.
So do I! Your analyses are great Brian, please keep 'em coming 
Wolfe advocates that the best waves are the ones that form just after a trend breakout. That does not seem to be your experience?
I think the markets Wolfe traded tended not to trend, preferring to revert to the mean instead. Hence any movement away from a sideways chop that had a WW formed would be almost guaranteed to reverse. I think that's why he allowed waves with a point 1 hanging halfway along the preceding rise or fall rather than on a swing high or low, as he's trying to catch as many mean reversion moves as possible.
Forex can be like that, but when it switches to trend mode it'll sometimes create a wedge and then explode out of it for a meteoric move (instead of reversing & negating the trend). Here's a couple of examples:-
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Therefore I prefer to see a WW form after the trend's run a bit (more chance of the traders entering it starting to exhaust) and the price is approaching a supply/demand zone (more chance of traders opposing the move). Some examples:-
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Also, do you find a particular TF best suited to this method? I've been using H4 and D1 but was wondering about playing around with M15.
I've morphed into a mostly H4 trader, simply because I'm too busy to watch the market (and I've found that I really don't need to). Harald, a good friend of mine, trades these patterns on M5 & M1 charts, so they're certainly valid on the lower TFs.
One more question if you don't mind. Have you got anything on Rashke waves you can share? I've found a lot of material written by her but so far nothing on the waves you were talking about.
In her writings she called them Wolfe Waves - Raschke wave is my term. In Bill Wolfe's definition, "Trend line of 1 to 3 and trend line of 2 to 4 must converge" (page 6 of his book), in other words the wedge formed by points 1 to 4 must be a converging one, not a price channel or an expanding formation. Linda Raschke, however, ignored this and posted examples of expanding formations in her book, calling them Wolfe Waves. Here's an example from her pdf...
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My aforementioned friend Harald and I noted this some time ago when I saw him trading them. I asked "shouldn't that be a converging wedge?" and he said if its good enough for Linda its good enough for me. As its a different formation, we decided to give it a different name (originally we suggested the "Loose Linda") as the rules of trading it are not the same as a WW. I'll add more analysis of Raschke Waves in a later post. |
What it does though is set a test for the market - there's no entry until the price demonstrates its willingness to reverse by punching through the band. Unless that happens I'm on the sidelines. Its contrary to Sam Seiden's principles of picking a supply or demand zone and entering against the market's direction hoping the zone holds, and it won't get you the greatest entry price or the tightest stop. What it should do though is ensure that a higher proportion of entries hit their profit targets rather than busting their stops.